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The design of optimal education policies when individuals differ in inherited wealth and ability

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  • Dario Maldonado

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Abstract

In this paper I consider the role of optimal education policies in redistribution when individuals differ in two aspects: ability and inherited wealth. I discuss the extent to which the rules that emerge in unidimensional settings apply also in the bidimensional setting considered in this paper. The main conclusion is that, subject to some qualifications, the same type of rules that determine optimal education policies when only ability heterogeneity is considered apply to the case where both parameters of heterogeneity are considered. This rules imply a widening of the education gap between high- and low-ability individuals in second-best with respect to the first-best gap. The qualifications regard the implementation of the optimal allocation of resources to education and not on the way the optimal allocation in first- and in second-best differ.

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Paper provided by UNIVERSIDAD DEL ROSARIO in its series DOCUMENTOS DE TRABAJO with number 003975.

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Length: 20
Date of creation: 31 Jul 2007
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Handle: RePEc:col:000092:003975

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Keywords: Optimal taxation; education; public provision; multidimensional screening;

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  1. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731, October.
  2. Hare, P G & Ulph, D T, 1979. "On Education and Distribution," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S193-212, October.
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  8. Cremer, Helmuth & Gahvari, Firouz, 1997. "In-kind transfers, self-selection and optimal tax policy," European Economic Review, Elsevier, vol. 41(1), pages 97-114, January.
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  12. Darío Maldonado, 2008. "Education policies and optimal taxation," International Tax and Public Finance, Springer, vol. 15(2), pages 131-143, April.
  13. Sveinbjörn Blöndal & Simon Field & Nathalie Girouard, 2002. "Investment in Human Capital Through Post-Compulsory Education and Training: Selected Efficiency and Equity Aspects," OECD Economics Department Working Papers 333, OECD Publishing.
  14. Arrow, Kenneth J, 1971. "A Utilitarian Approach to the Concept of Equality in Public Expenditure," The Quarterly Journal of Economics, MIT Press, vol. 85(3), pages 409-15, August.
  15. Sourafel Girma & Abbi Kedir, 2005. "Heterogeneity in returns to schooling: Econometric evidence from Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 41(8), pages 1405-1416.
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